It is now imperative for Coffee shops to have Internet connectivity: Coffee Day's VG Siddhartha

VG Siddhartha tells a remarkable story of turning a 146-year-old family coffee plantation into a export business, and later into a retail venture with 1,650 cafes in IndiaAvik Das&Sujit John | TNN | Updated: July 13, 2016, 12:43 IST

VG Siddhartha loves art, numbers and stories. At his UB City office, a corner high rise whose glass walls over look most of Bengaluru landmarks ­ Vidhana Soudha to Chinnaswamy stadium.

"Art is just a hobby, not an investment," says the cheerful chairman of Amalgamated Bean Coffee Trading Company as he ushers us in for a meeting.

What gets this dapper 56-year-old entrepreneur going is numbers that have aided him from his stock analyst days in Mumbai to being the creator of one of the biggest retail brands, Café Coffee Day.

On the eve of 20 years of CCD opening a cyber café outlet on Brigade Road, Siddhartha says there won't be any celebrations. Instead, he tells a remarkable story of turning a 146-year-old family coffee plantation, first into a successful export business, and later into a retail venture with 1,650 cafes in India despite stiff competition from global giants.

How did your family get into coffee plantation?

We have been selling coffee since 1870 in estates near Chikkamagalur. In 1820, the British government sent their countrymen to set up plantations. My greatgrandfather was asked by a British planter to grow coffee. We have a 550-year-old house there and after the ancestral property was divided between my dad and uncle, we bought 479 acres of land for about Rs 90,000. That was the beginning.

I could have stayed in the family business but I did not want to retire at 21 in 1985. So, I got into stock market investing, but kept buying coffee estates during the coffee downturns. By 1992, we had 3,500 acres.

In India, the Coffee Board controlled the prices, so growers received far less than the international price. In the early 80s, I had a gut feeling that the market would open up. In 1992, the Indian economy opened up and the market was freed from the Coffee Board's monopoly. Once producers were allowed to export, they could get a fair price on coffee. By 1995, we were India's largest coffee exporters.

What inspired you to start a coffee chain business way back in 1996?

The idea of starting a brand came when I met a member of the family which owns Germany's best-known coffee brand Tchibo, which was our second largest buyer. Tchibo started with just a 10 sqft outlet selling coffee powder in 1948 in Hamburg and went on to become the second largest coffee roaster in Europe. If Tchibo could have made it so big in 40 years, why couldn't we?

I started 20 coffee powder selling stores in Bengaluru and Chennai and around 1995 wondered how I could add value to the coffee powder I was selling. I thought of opening a café on Brigade Road, the most happening street in those days. A colleague counted the number of people who came there ­around - 50,000 walked up and down every day! But 50 ft from where we were to start the café, there was a guy selling coffee for Rs 5. So I dropped the idea, till I saw people in a Singapore cafe sipping beer and browsing the Internet.

I thought this was an idea that could work in Bangalore as the city had begun to see the emergence of software companies with young professionals. A colleague of mine sat in Delhi for three days to get a 64KVA line for Internet, the first outside the STPI (Software Technology Park of India) in Bangalore. We also got IBM PCs and started Coffee Day Cyber Café in 1996 with an investment of Rs 1.5 crore.

What sort of challenges did you face along the way?

Between 1996 and 2000, we had 20 stores in Bengaluru, Chennai and Hyderabad. It was still a small business but we were complacent and thought of ourselves as southern kings due to our end-to-end approach.

Then in 2001, Barista opened 10 stores each in Mumbai and Delhi. We never thought anybody else would enter this market. We reorganized the team, got a new chief executive and entered Delhi and Mumbai in 2002. Over the next two years, we had 200 stores across the country.

While opening in Mumbai, we were worried about high rentals which made us take up small properties without a washroom. By 2008, the scenario had changed. A washroom was an unsaid requirement, along with good ambience. Now, it is imperative to have internet connectivity. Like a Gujarati businessman said, “Earlier, it was pani de do. Now, it's password de do.“

What are your expansion plans? Don't you think Starbucks and Costa are attracting some of your premium customers? Does that worry you?

Our aim is to open about 135 stores annually for the next three years. We have 1,650 stores out of 2,000 in the Indian market. Given the size and presence of players, there will be 5,000 stores in the next seven years.

We plan to expand to 20 countries in the next four years. We are already present in the Czech Republic, Austria, Egypt and Malaysia and plan to get into Nepal, Kuwait and Indonesia. Our newer stores are much bigger than our older ones because customers today want a feeling of space. The stores have all the modern amenities.

CCD is cheaper by 50% compared to international chains but that does not mean I look cheap. Three hundred and fifty of our stores have WiFi and in the next six months we will have it everywhere.

Anything else that you are doing to modernise?

We started an app earlier this month which helps us manage consumer data and personalize offerings. This will revolutionize our marketing. About 22% of our biggest competitor's sales in the US comes through their app. Through the app, we are looking to build more loyalty and drive footfalls. We are value for money. We are the Walmart of India.